BACK ON TARGET
Despite exiting Canada earlier this year, Target posted quarterly earnings that topped analysts’ estimates,
Target Corp. chief executive officer Brian Cornell, who’s working to turn around the retail chain, is struggling with a problem that has plagued rival Wal-Mart Stores Inc. for years: empty shelves.
Cornell said on Wednesday that its stores in the U.S. aren’t stocked well enough, a problem that hurt its ill-fated foray into Canada and a symptom of Target losing track of its retail fundamentals. He’s looking for ways to improve “instocks” — a measure of how much merchandise is available for shoppers to buy — and refine the company’s supply chain.
“Our guests deserve better,” Cornell, a former PepsiCo Inc. and Wal-Mart executive who took the helm at Target a year ago, said on a conference call.
The situation is marring an otherwise-successful comeback bid for Target, which posted quarterly earnings on Wednesday that topped analysts’ estimates. To help fix the problem, Cornell has named chief financial officer John Mulligan to the role of chief operating officer. Mulligan will take that job next month and improving the supply chain will be his main focus.
The problem stems in part from a shift to online ordering. Target has been investing heavily in its e-commerce site and the ability to ship items directly from stores.
It plans to have 450 stores that will act as online fulfilment centres by the end of the year. In doing that, the supply chain has been overextended, Target said.
Shoppers are visiting the company’s stores more often and spending more on each trip, the Minneapolis-based discount-store chain said Wednesday. The company raised its annual profit outlook and said its second-quarter net income more than tripled.
The upbeat report is evidence efforts to spruce up fashions and other merchandise are paying off for Cornell, who has led the company for a year with marching orders to fix the “cheap-chic” retailer.
Target’s results are one of the few bright spots in retail second-quarter earnings.
Department store chains Macy’s and Kohl’s both reported declines in secondquarter profit and weak sales as shoppers have been pulling back on buying items such as clothing and gravitating more toward services or going out to eat.
Wal-Mart Stores Inc., the world’s largest retailer, announced Tuesday a 15-percent drop in second-quarter income and cut its annual outlook, as its investment in its stores, e-commerce and increases in wages for hourly workers are dragging down results. But those efforts are perking up sales and traffic.
Target is placing heavy emphasis on fashion, children’s goods and home products. Those areas typically carry higher profit margins
Cornell succeeded Gregg Steinhafel, whose abrupt departure in May 2014 capped a tumultuous year for Target.
It was hurt by a massive credit-card breach before Christmas 2013 that sent shoppers temporarily fleeing. The company also botched a major expansion into Canada that the company pulled the plug on earlier this year.
Cornell aims to reinvent Target as a more nimble force amid fierce competition.
Target is placing heavy emphasis on fashion, children’s goods and home products. Those areas carry higher profit margins.
Target has wrestled with uneven growth since the Great Recession.
Its expansion into basic groceries during the downturn helped bring in shoppers but diluted its focus of being a style purveyor.
The company said second-quarter earnings were $753 million, or $1.18 per share, for the three-month period ended Aug. 1. That compares with $234 million, or 37 cents per share, a year earlier.